India is likely to close 2023 with lower tea production and exports even as prices continue to remain sluggish.
With a slump in North Indian tea production in September due to irregular weather, India’s output is expected to be lower than last year. Though tea exports have shown some signs of revival lately, the industry reckons that it will fall well short of the 231 million kgs shipped in 2022.
The recent developments have failed to lift prices.
Tea production, which was more or less at the same level till June in 2023 had even improved slightly in July, kindling hopes of a marginally higher annual output. But the production fall in North India has upset the calculations of the industry.
“Huge rainfall in Assam led to floods in the state and tea estates were inundated. As a result, there was a production loss. A crop shortfall was seen in the Dooars region of West Bengal as well due to inclement weather,’’ said Sujit Patra, tea expert and former secretary of the Indian Tea Association.
North Indian tea production, which accounts for over 80 percent of the total tea output in the country, slumped by 19 percent in September 2023 year-on-year to 138.86 million kg, as per Tea Board figures. In contrast, South Indian production rose by 2.4 percent to 24.04 million kgs for the month. In the January-September period, total tea production in the country stood at 980.22 million kgs, down 2.29 percent from the same period a year ago.
As the prospects don’t look bright for the coming months, the annual output is expected to decline after rising for the last two years. “The impact of the rainfall has been seen in tea plantations in October. Usually, the November and December crop will be lower than the previous few months and hence it will be difficult to make up the loss sustained in two months. In December, the North Indian tea produced will be of inferior quality and hence there is a restriction in picking,’’ Patra said.
Weak export trend
The export trend has been weak through the year. As per the latest data, from January to August, India exported 133.32 million kg of tea, which is 8.42 million kg or 4.22 percent lower than in the same period of the previous year. At 231 million kg in 2022, tea exports rose 18 percent over the previous year.
Though there are some signs of hope on the export front, business is yet to return to normal, say exporters. “The Iran market has opened up a bit. Though verification of contracts has begun, allocation of foreign exchange in the country needs to improve,’’ said Anshuman Kanoria, chairman of the Indian Tea Exporters Association. Iran and Russia are two key markets for Indian tea.
Shipments may not have touched the current level if Indian tea exporters had not penetrated other markets more. “Despite the risk of payment problems, Indian exporters were able to ship more tea to Iraq and other countries in the region namely Turkey, Syria, Jordan etc.,’’ Kanoria said.
In the current circumstances, he expects the total tea export for 2023 to be in the range of 200-210 million kgs.
The two wars—Russia-Ukraine and Israel-Palestine—and the sanctions on Iran are the chief geopolitical events affecting exports, according to Rajesh Gupta, MD of Global Tea Auctioneers Pvt. Ltd. “Other causes include oil price volatility resulting in high shipping freight cost, currency devaluation in tea-consuming countries such as Egypt, Pakistan, Russia, Turkey, Malaysia and Taiwan, excess tea production in Kenya and Bangladesh, stringent pesticide limit norms in Europe and several other countries,’’ he said.
The crop in Kenya was up by 6.6 percent till September, while Bangladesh’s tea production has risen by 8.2 percent for the period. Even Sri Lanka has shown a marginal improvement in its tea output, Gupta said, quoting figures from globalteadigest.com. Indian tea exports were helped last year by the plunge in output in Sri Lanka, which is a significant producer of Orthodox tea.
Kanoria opined that Indian Orthodox tea prices would pick up once buying from Iran increases. “It will also encourage more production of the Orthodox variety in the country,’’ he said. Right now, almost 90 percent of the tea produced in India is of the CTC (crush, tear, curl) variety.
Price flat in home market
In the domestic sector average tea prices have remained flat at around Rs 180 per kg in the January-October period. This is more due to steady rates in South Indian tea prices. North Indian tea prices are down by about 6 percent compared to the same period last year.
“North Indian tea prices showed declining averages in Q2 and Q3 after remaining flat in Q1 in 2023 compared with rates in the previous year, resulting in a loss of revenue. The average price dropped by Rs 15 per kg in October,” said Gupta. “South Indian tea prices showed improvement in Q1 and Q2 but the averages fell in Q3 leading to erosion of profits gained in the first 6 months.’’
Curiously, prices have not hardened even after the plunge in North Indian tea output in September, indicating that consumption is down. An earlier survey by the Tea Board five years ago showed tea consumption in the country had been growing annually by 2.3 percent. During the pandemic years, demand for packet and premium teas became more pronounced while that for loose tea sagged.
“At present there are huge losses in the tea auctions with sluggish offtake. This could mean that consumption has either gone down or the figures of the earlier survey were overestimated. We need a more elaborate study on tea consumption in the country,’’ said Patra.
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